After yesterday’s news that Statoil ASA was going to acquire Brigham, the long road for Brigham investors appears to be nearing an end. Brigham has 370,000 plus acres in the Williston basin that holds a resource base of 300 million to 500 million barrels of oil. At the acquisition price of $36.50, the 2012 PE multiple looks to be around 16. This seems expensive for a traditional and mature O&G producer, but for a company like Brigham can be viewed as fair value or perhaps even “cheap”. In terms of a “Bakken Pure Play”, Brigham is the only game in town that has significant acreage, a clear competitive advantage and a market cap under 5 billion dollars. Brigham has completed 88 consecutive, successful Bakken and Three Forks long lateral, high frac stage completions in North Dakota averaging 2,797 barrels of oil equivalent during the early 24 hours peak flow period. Brigham often is able to squeeze 20-40% more oil out of every well than their competition… In fact they have copyrighted the slogan “No Oil Left Behind” to stress their ability and acumen to maximize drilling efficiency. In my opinion, the perfect suitor would be a be O&G conglomerate that ALREADY has Bakken acreage, not a overseas O&G firm that is desperately looking for a growth engine. A company with significant Bakken acreage would be able to apply Brigham’s patented processed and techniques on their own properties and derive more overall value from their own portfolio. Something that StatOil will not be able to do with the Brigham Exploration. I wouldn’t be surprised to see a bid in the $39-42 range for Brigham in the next 2 weeks. That would still put the forward PE at a respectable 18 and be less than a $5 billion acquisition which is effectively in the noise for a larger player. It seems that Statoil ASA needs Brigham more than Brigham needs Statoil ASA, we’ll see if I’m right in the coming weeks.
Note: Please note this is just an opinion and does not constitute investment advice
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